This paper identifies the types of shocks that affect the economies of Europe, the USA and Japan, and the transmission paths of those shocks between these countries. The identification of shocks is based on the Cointegrated VAR methodology. The categorization and interpretation of shocks are based on synthesis of theoretical studies on international business cycles and international policy coordination. We show that the Cointegrated VAR model is a valid choice and that it demonstrates good fit with the data-generating processes of the time series examined. We find that country-specific US permanent shocks transmit to Europe and Japan and, when positive, have a locomotive effect. The USA is not affected by the country-specific permanent shocks of Europe or Japan. The permanent shocks originating in Europe or Japan do not have a significant effect on the opposite country's growth rates. The model identifies one common symmetric transitory shock affecting all three countries. Copyright © 2009 John Wiley & Sons, Ltd.
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